Residential landlords are the latest group receiving ‘nudge’ letters from HM Revenue & Customs (HMRC).
A part of a targeted ‘nudge’ campaign from HMRC, the letters remind landlords of their obligation to declare their rental income.
What is a ‘nudge’ letter?
Since 2017, HMRC has used these ‘nudge’ letters to communicate and prompt responses from recipients by offering reduced fines for a declaration of unpaid tax.
We have seen the method used for taxpayers holding overseas bank accounts and individuals claiming non-domicile status.
Holders of crypto-assets have also received nudge letters reminding them that Capital Gains Tax (CGT) is payable on income gained from the sale or trade of crypto assets.
The letters sent to landlords suggest they review their tax position and complete a certificate of tax position within 30 days.
Failure to reply could lead to fines, further investigation, or criminal prosecution.
So far, nearly 1,000 property owners are suspected of tax underpayments and received ‘nudge’ letters.
Evidence gathered via online data tracking
Online booking platforms, VRBO and Airbnb, gathered evidence behind this recent approach, as they are obligated to share data of registered users and their financial transactions.
Issuing the letters is a way to give taxpayers a genuine chance to rectify any discrepancies and pay tax on undeclared income.
Landlords can take out Client Protection Insurance via their accountant, which protects them against the costs of an HMRC investigation.
